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on Cognitive and Behavioural Economics |
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Issue of 2025–01–06
four papers chosen by Marco Novarese, Università degli Studi del Piemonte Orientale |
| By: | Christian Belzil (CREST, CNRS, Paris Polytechnic Institute, IZA, CIRANO); Tomáš Jagelka (University of Bonn, Dartmouth College, CREST-Ensae, IZA) |
| Abstract: | We develop a micro-founded framework for accounting for individuals' effort and cognitive noise which confound estimates of preferences based on observed behavior. Using a large-scale experimental dataset we estimate that failure to properly account for decision errors due to (rational) inattention on a more complex, but commonly used, task design biases estimates of risk aversion by 50% for the median individual. Effort propensities recovered from preference elicitation tasks generalize to other settings and predict performance on an OECD-sponsored achievement test used to make international comparisons. Furthermore, accounting for endogenous effort allows us to empirically reconcile competing models of discrete choice. |
| Keywords: | Preferences, risk preference, stochastic choice models, endogenous effort, cognitive noise, task complexity, experimental design |
| JEL: | D91 C40 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:ajk:ajkdps:350 |
| By: | Jean-Sébastien Lenfant (PRISM, Université Paris 1 Panthéon-Sorbonne) |
| Abstract: | The purpose of this article is to provide a historical account of the contributions to judgment and decision making by four cognitive psychologists at the turn of the 1970s: Sarah Lichtenstein, Paul Slovic, Amos Tversky and Daniel Kahneman. Beyond the usual focus on Kahneman and Tversky's heuristics and biases approach, we uphold that historians of behavioral economics would gain from a broader and more balanced view of the contributions of these four psychologists to the theory of decision making. Together with the heuristics and biases approach, experiments on preference reversal and choice intransitivities represent a multifaceted criticism of standard theories of choice and decision against which the genesis of behavioral economics could be evaluated. |
| Keywords: | Lichtenstein (Sarah), Slovic (Paul), Tversky (Amos), Kahneman (Daniel), heuristics and biases, preference reversal, intransitivity, preferences, behavioral economics, conjoint measurement, judgment, expected utility theory, mathematical psychology, cognitivism, experiments |
| JEL: | B21 B29 D91 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:gre:wpaper:2024-31 |
| By: | Zvonimir Bašić (Adam Smith Business School, University of Glasgow, UK); Stefania Bortolotti (University of Bologna); Daniel Salicath (Norwegian Labour and Welfare Administration); Stefan Schmidt (Max Planck Institute for Research on Collective Goods, Bonn); Sebastian Schneider (Max Planck Institute for Research on Collective Goods, Bonn); Matthias Sutter (Max Planck Institute for Research on Collective Goods, Bonn, University of Cologne, Germany, University of Innsbruck, Austria, IZA Bonn, Germany, and CESifo Munich) |
| Abstract: | Incentives are supposed to increase effort, yet individuals react differently to incentives. We examine this heterogeneity by investigating how personal characteristics, preferences, and socio-economic background relate to incentives and performance in a real effort task. We analyze the performance of 1, 933 high-school students under a Fixed, Variable, or Tournament payment. Productivity and beliefs about relative performance, but hardly any personal characteristics, play a decisive role for performance when payment schemes are exogenously imposed. Only when given the choice to select the payment scheme, personality traits, economic preferences and socioeconomic background matter. Algorithmic assignment of payment schemes could improve performance, earnings, and utility, as we show. |
| Keywords: | Effort, productivity, incentives, personality traits, preferences, socio-economic background, ability, heterogeneity, sorting, algorithm, lab-in-the-field experiment |
| JEL: | C93 D91 J24 J41 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:mpg:wpaper:2024_13 |
| By: | Christoph Feldhaus (Department of Economics, Ruhr-University Bochum); Lukas Reinhardt (Centre for the Study of Social Cohesion, University of Oxford and Identity and Conflict Lab, Yale University); Matthias Sutter (Max Planck Institute for Research on Collective Goods, Bonn, University of Cologne, Germany, University of Innsbruck, Austria, IZA Bonn, Germany, and CESifo Munich) |
| Abstract: | In a democracy, it is essential that citizens accept rules and laws, regardless of which party is in power. We study why citizens in polarized societies resist rules implemented by political opponents. This may be due to the rules’ specific content, but also because of a general preference against being restricted by political opponents. We develop a method to measure the latter channel. In our experiment with almost 1, 300 supporters and opponents of Donald Trump, we show that polarization undermines rule-following behavior significantly, independent of the rules’ content. Subjects perceive the intentions behind (identical) rules as much more malevolent if they were imposed by a political opponent rather than a political ally. |
| Keywords: | Political polarization, Social identity, Outgroup, Economic preferences, Experiment |
| JEL: | C91 D90 D91 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:mpg:wpaper:2024_15 |